Question

Poehling Medical Center has a single operating room that is used by local physicians to perform surgical procedures. The cost of using the operating room is accumulated by each patient procedure and includes the direct materials costs (drugs and medical devices), physician surgical time, and operating room overhead. On January 1 of the current year, the annual operating room overhead is estimated to be:

Disposable supplies		$247,700
Depreciation expense		44,700
Utilities		26,000
Nurse salaries		371,900
Technician wages		121,700
	Total operating room overhead	$812,000

The overhead costs will be assigned to procedures, based on the number of surgical room hours. Poehling Medical Center expects to use the operating room an average of eight hours per day, seven days per week. In addition, the operating room will be shut down two weeks per year for general repairs.

a. Determine the predetermined operating room overhead rate for the year.
$ per hour

b. Bill Harris had a 4-hour procedure on January 22. How much operating room overhead would be charged to his procedure, using the rate determined in part (a)?
$

c. During January, the operating room was used 186 hours. The actual overhead costs incurred for January were $52,800. Determine the overapplied operating overhead or underapplied operating overhead for the period. Enter your answer as a positive number.
$

Answer 1

1.

Poehling Medical Center expects to use the operating room an average of eight hours per day, seven days per week. In addition, the operating room will be shut down two weeks per year for general repairs.

Estimated annual surgical room hours = 8 x 7 x 50

= 2,800

Predetermined operating room overhead rate = Total operating room overhead/Estimated annual surgical room hours

= 812,000/2,800

= $290 per surgical room hour

2.

Operating room overhead to be charged to Bill Harris = Predetermined operating room overhead rate x Hours used in Bill Harries procedure

= 290 x 4

= $1,160

3.

During January, the operating room was used 186 hours. The actual overhead costs incurred for January were $52,800.

Applied overhead = Predetermined operating room overhead rate x Actual hours used

= 290 x 186

= $53,940

Over applied operating overhead for the period = Applied overhead - Actual overhead

= 53,940 - 52,800

= $1,140

Kindly comment if you need further assistance. Thanks